Annual Project Report
Establishment of National Registry System for Domestic Emissions Trading Scheme
and Voluntary Carbon Emission Reduction Project (ETS)
[February 11, 2014]
Basic Project Information
Project Title:
UNDP Award ID
UNDP Project ID
CRIS Contract Number
Project Duration
Reporting Period
Total Approved Project Budget
Participating UN agencies
Implementing Partners/
National collaborating agencies
International collaborating agencies
Cost-sharing third parties
UNDP Contact officer
Project website
1. Executive Summary
00063571
00080582
a/n
3 year (2011-2014)
January 1, 2013 - December 31, 2013
NOK 35,460,700
UNDP China
National Development and Reform
Commission (NDRC), The Norwegian
Environment Agency (NEA)
NEA
Norway
Wu Peng
 Knowledge sharing mechanism between China and Norway/EU was established at both
national and sub-national level with sound balance between policy support and capacity
building.
 Effective mechanism was established for knowledge sharing and knowledge application for the
ETS development in China with reference made to ETS development in Norway, German and
EU through workshops, study tour and cooperation among NDRC, NEA, Tsinghua,
SinoCarbon and other relevant shareholders.
 Effective Public and Private Partnership was established for registry system development for
ETS VER with NDRC focusing on policy and relevant institutional building, Tsinghua focusing
on technical issues and SinoCarbon working on business model.
 Synchronized software and hardware development mechanism to ensure proper balance
between performance requirement and security requirement, which is the foundation of the
success.
 The design of the voluntary emission reduction project registry and national ETS registry was
completed with inputs from both domestic and international partners.
 Software development plan was completed with completion of bidding and start of the software
development/testing.
 Network construction plan is formulated including security construction and date
storage/backup with technical reviews conducted.
 Preparation of relevant manuals/guidelines and training started with relevant surveys
completed for capacity building once the system is in place.
 Mid-term evaluation was also conducted with very positive conclusions with regard to the
project contribution to the ETS development in China.
 In conclusion, the project has in general succeeded in the technical development stage with
laid a solid foundation for the next year work of management/operation model feasibility
development which will need more intensive cooperation between all stakeholders to work
together at international, national and sub-national level.
 This annual report covers the reporting period of January 2013 – December 2013.
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2. Context
China’s National Development and Reform Commission (NDRC), has played a key role in
coordinating climate change efforts since 1998 (which has broad administrative and planning control
over the Chinese economy), decided in 2011 to pilot carbon trading in seven regions, as illustrated in
Figure 1, with a total population of 240 million and a collective GDP of some $2 trillion. The purpose
is to gain experience in carbon related market mechanisms ahead of launching a national CO2 market
by the 13th FYP.
Figure 1: Approved Pilot Carbon Trading Schemes in China
China issued tentative ETS regulations in June 2012, following which NDRC launched ETS pilot
programs in the cities of Beijing, Tianjin, Shanghai, Chongqing and Shenzhen, as well as the
provinces of Guangdong and Hubei. The pilots are part of the key endeavors in China's 12th Five-Year
Plan (2011-2015) and it is hoped to roll out the carbon market to other regions and eventually across
the nation from 2015.
In order to encourage social wide participation in GHG (Greenhouse Gas) reduction activities and
create a climate-friendly society featured by government guidance, the Chinese government has made
valuable efforts to build a policy environment toward emissions trading scheme recently, such as The
Tentative Management Method for China’s Voluntary GHG Reduction Trading Activities released by
NDRC.
Based on this, the Norwegian-supported ETS project is aimed to support these policies by designing
and building technical measures to regulate and supervise the voluntary market. The Goal of the
Project is to contribute to the development of measures aimed at reducing the carbon intensity in the
Chinese economy as set in China’s 12th Five-Year Plan. The objectives of the ETS project include:
1) Establishing national voluntary emission reduction project registry system to maintain a
common voluntary market with centralized information disclosure and standardized trading
commodities;
2) Establishing a national registry for regional and nationwide emissions trading schemes to
materialize the national objective to build carbon market gradually; and
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3) Capacity building by carrying out education and training activities to build and enhance the
capacities of stakeholders in the voluntary project market, and regional and national emissions
trading market
3. NEA Key results
The general progress of the Norwegian-supported ETS project has had a positive development during
the reporting period and achieved satisfying progress.
The ETS project is in line with and useful to China’s priorities in climate change and emission
reduction, which also fall into Norwegian key priority areas for cooperation with China.
Thanks to the implementation of the ETS project, China’s preparedness has been enhanced for being
able to embark on a nationwide ETS trading by 2015, following the launch of the ETS pilots in 2012;
and the Norwegian ETS expertise, which has been contributive to the EU ETS, has been tapped into in
designing China’s own ETS system through the exchanges among the Chinese and NEA experts.
As of end 2013, the other key results of the ETS project include, but not limited to:
The Norwegian project team has had a project workshop/meeting in January with Tsinghua and Sino
Carbon related to activity 1.1 and 1.2; review and design of the technical framework of a registry
system in China. (Output 1 and 2).
The agenda items included information on the EU ETS registry system, especially the latest
development of the common EU wide registry. The Norwegian team (Carina Heimdal and Katja
Ekroll Jahren from NEA) gave a presentation on the transition from the old Norwegian national
registry to the common EU-wide Union Registry. The different types of accounts, rules for transfers
and account opening were discussed in detail. The Norwegian team answered a lot of questions raised
by the Chinese project teams, both from Tsinghua University and SinoCarbon. These discussions
informed the work both under output 1 (Overall Plan of National Voluntary Emission Reduction
Project Registry System and National Registry System for ETS) and output 2 (National Voluntary
Emission Reduction Project Registry System and National Registry System for ETS).
The Norwegian team also had a brief meeting in January with NCSC regarding the output 3 – capacity
building and user interface. This part was still only on its first stages, due to the fact that it relies on
the design of the registry.
In April, Norway submitted a report on security issues related to the IT design of the Chinese national
registry (activity 1.6). The report provides an overview of best practices in this area. The feedback
from SinoCarbon was that the input provided was very useful and this was used in designing the IT
architecture of the Chinese ETS registry (output 2).
The Norwegian project team participated on the International seminar arranged by NDRC on ETS on
25 April, where the national registry was presented. A senior EU registry expert participated in the
seminar, presenting key lessons learnt on registry systems in phase 2 of the EU ETS. This contributed
to progress towards completing activity 1.3 (making the overall plan of the voluntary emission
reduction project registry system and national registry system for ETS in China).
The Norwegian registry administrator (Carina Heimdal) participated in the Chinese delegation's visit
to the German registry administrator, Mr. Thomas Schütz, in Berlin in late June 2013. The German
registry administrator works in the German Emissions Trading Authority (Deutsche
Emissionshandelsstelle, DEHSt), which is part of the Federal Environment Agency. It was very
valuable for the Chinese participants to hear the experience of a large European country (and the
largest in the ETS) with the ETS registry, and this further improved the knowledge and understanding
of different registry systems (activity 1.1.1). The German registry administrator held a presentation on
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the transition from the German national registry to the EU-wide Union Registry, and also shared
knowledge on the fraud incidents in phase 2 of the EU ETS. The Head of the section for allocation
also held a presentation, discussing the allocation methodologies and challenges with the allocation
decisions. This provided further knowledge on issues covered by output 1 and 2.
Norway (Elin Økstad and Carina Heimdal from NEA) assisted in the preparation of the meeting with
the EU Commission in July 2013.This was part of a study tour to Europe as a part of this project. Both
EU officials working with the ETS in general and registry experts gave presentations to the Chinese
delegations. The meeting lasted for an entire day, leaving ample time for detailed discussions and
questions from the Chinese delegation. The presentations and discussions mainly covered output 1 and
2. Output 3 was also briefly covered, as the user manual and training of users was also discussed.
In October, the Norwegian team (Carina Heimdal and Finn Jostein Gjelten) receive a demonstration of
the web user interface of the registry system by Sino Carbon. The demo showed the two levels of
administrator access (national and provincial), creation of different account types (compliance,
general, trading), creation and allocation of allowances, reversal of transactions, as well as plans for a
pilot run and testing. Issues for further cooperation were identified, such as experience on testing and
bug tracking, training procedures and analysis of the market behaviour. The meeting confirmed the
important progress made regarding output 2 of the project. It also provided a good base for discussing
areas for further cooperation.
A revised project plan has been developed in order to expand the project activities with supplementary
activities on:
a) The implementation of the amended functionalities for provincial level.
b)
The implementation of the amended functionalities of surrendering China Certified Emission
Reductions (CCER) to perform compliance in pilot areas.
c)
The development of a market behaviour analysis system.
3. NDRC Progress Report of the ETS in 2013
The expected key results of the ETS project include:
Output 1: National Voluntary Emission Reduction Project Registration and Management System;
Output 2: National Registry System for Emissions Trading Scheme;
Output 3: Capacity building; and
Output 4: Project execution report
Output 1 ： National Voluntary Emission Reduction Project Registration and Management
System
Activity 1.3
Finalize the design of the voluntary emission reduction project registry and national ETS registry
1. Draft the design of the two registries.
 This has been done after the second round of discussion on design plan of National
Registry System.
2. Gather comments and suggestions from relevant authorities, experts and potential users of the
registries through consultations.
 Several seminars in the team have been held.
 One workshop with experts from EU was held on January 23rd, 2013.
 Workshops with governors in charge and other experts were held on March 19th, 2013
and April 9th, 2013.
3. Improve and finalize the design of the two registries.
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Several seminars in the team have been held.
A series of workshops with EU experts during the visit to Germany and the European
Commission from June 25th to July 4th in 2013.
Workshop with governors in charge and other experts was held on Aug 6th, 2013
The design of the two registries has been finished after the process of consultation.
Activity 1.4
International workshops
One international workshop was held in Beijing on April 25th, 2013.
Activity 1.5
Complete project executive report of National Voluntary Emission Reduction Project Registry System
and National Registry System for ETS (Chinese and English version)
This should be finished after the above activities. A first version of study report of National Voluntary
Emission Reduction Project Registry System and National Registry System for ETS in Chinese
version has been finished. The English version is being finished.
Output 2：National Registry System for Emissions Trading Scheme
Activity 2.1
According to the overall design, research on the application situation of similar domestic and
international softwares.By comparison, analyse their function design and security design.Finish the
software developing plan of the national voluntary emission reduction project registry system and
national ETS registry system.
Activity 2.1.4 Finish the software developing plan of the national voluntary emission reduction
project registry system and national ETS registry system.
1. The Analysis of Requirements
After the final determination of the requirements of the national registry system on April 19th 2013,
the team from SinoCarbon performed a thorough analysis on the system requirements proposed by the
team from Tsinghua University. By the analysis process, proper understandings of the system
requirements for the national registry system have been achieved. Based on the result of requirement
analysis, a requirement specification has been composed by the team from SinoCarbon. The document
provides specific description on each function of the national registry system with detailed flow charts.
In the proposed requirement specification, intrinsic uncertainties in the operation procedure of the
national registry system has also been considered and tackled.
During the requirement analysis process, the business framework of the national registry system
designed by the team from Tsinghua University was thoroughly studied in the first step. Based on the
business framework, the whole workflow of the system was resolved to specific functionalities for the
national registry system. For each one of the functionality of the national registry system, multiple
specific workflows were further designated, in consideration of the uncertainty of the requirements on
the practical operations of the national registry system. The requirement of providing configuration
options for selecting the active workflow for certain functionality was also specified consequently.
Due to the importance of the security of the national registry system, the security requirement of the
national registry system was also rigorously studied, in terms of the security threats and benefits of
stakeholders. In considerations of the security requirements and the experiences from the registry of
EU ETS, functionality requirements for ensuring the security of the national registry system were
further identified. Additionally the requirements of privileges and roles of the system were also
determined, in consideration of the security requirements of the national registry system. In order for
achieving the performance requirements of the national registry system, the potential quantity of the
access to the national registry system and the potential quantity of the data generated by the national
registry system were analyzed based on the estimation of the business quantity of the national registry
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system. The requirement specification of the system contains all the results of the requirement
analysis.
2. The Development of a Demo
In order to transfer the requirements for conducting the business processes of the registry system into a
form that can be utilized directly for the software development, a static web page based demo of the
national registry system has been developed by the team from SinoCarbon. The focus of the demo is
on the perspective of UI design of the national registry system. By establishing the demo, the
requirements for conducting the business processes of the registry system has been further clarified in
the perspective of software design.
The demo of the national registry system was developed in three stages. In the first stage a prototype
of the demo was developed according to the requirement specification. The prototype contains the UI
of the main framework of the national registry system, including the both the UIs for the management
organizations and the UIs for other users of the national registry system. The UIs for the management
organizations were further separated into the UIs for the national level management organizations and
the UIs for the provincial level management organizations. In all the UIs for the management
organizations, the management operations are arranged according to the management accounts.
Similar to the online banking system, the UIs for the management organizations, the entrance provided
by the UIs for other users are arranged according to the accounts, of which the logged in user is an
account representative. A user can perform operations in each account that the user can operate with
certain representative privileges. In the second stage of the demo development process, the UIs
designed in the first stage were thoroughly refined in the perspectives of style and the specific display
names of each component of the UI. Additionally some of the arrangements of the functionalities were
also modified in this stage according to the issues identified in the prototype of the demo. In the third
stage of the demo development process, the demo was presented to the members of the team from
Tsinghua University. According to the feedbacks proposed by the members if the team from Tsinghua
University, the demo was further modified.
3. The Design of a Sketch of the Software Architecture
In addition to the establishment of the demo of national registry system, a sketch of the software
architecture of the national registry system has also been proposed by the team from SinoCarbon. The
focus of the proposed software architecture is on the issues that can significantly influence the security
and the performance of the national registry system. The design of the sketch of the software
architecture includes the architecture of the communication scheme between the web server and the
app server. In addition, the design has also addressed the core execution mechanism of the app server.
In order for ensuring the security of the system, several schemes of encryption and database access
privilege separation are proposed in the design. Additionally an authentication scheme for the
communication between the national registry system and the trading platform is presented in the
design. A database design is also included in the design.
The software architecture was designed in consideration of the performance requirements and the
security. In order to ensure the performance requirements of the national registry system, several
architecture designs for the system were compared and evaluated, in terms of multiple perspectives
such as communication efficiency, request process efficiency, scalability in functionality, scalability in
performance, and the risk and cost of development. By achieving a balance of all the perspectives, a
proper design of the software architecture was identified. Additionally the security schemes utilized by
the inner-operation of the software for ensuring the fulfilment of the security requirements of the
national registry system were also thoroughly identified and presented in the proposed software
architecture design. The database design of the national registry system was performed in
considerations of the functionality requirements, performance requirements and the security
requirements of the system. In order to ensure the fulfilment of the functionality requirements of the
national registry system, the tables of the database of national registry system were designated to store
the information essential to the functionalities of the national registry system, such as the information
of accounts, the information of account holders, the information of account positions, the information
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of roles, the information of privileges, the information of trust list and the information of audit.
Additionally proper divisions of the tables were further performed, in order to decrease the
redundancies of the stored information. In the table division process, the balance between the
redundancy level of the stored information and the performance of the database operation were further
considered and achieved.
Activity 2.1.5 Organize experts to review the software developing plan, and modify the design
according to their suggestions.
1. Technical Workshop
A technical workshop attended by experts of software design and development has been held on 20th
June. In the workshop, the design of the software architecture was thoroughly discussed.
2. Technical Issues to be solved
Several technical issues obtained by the discussion of the workshop listed below have been studied
and resolved.
The clustering strategy of the database servers of the system.
The data distribution scheme of the system.
The data cashing mechanism of the system.
The selection of specific development technology for the system, in consideration of the cost and
reliability of the system.
The balance of the budget and the system performance requirement of the system.
3. Formal Review Meeting
On August 6th, a meeting for reviewing the construction plan of the national registry system was held
by the team from Sino-Carbon. Relevant officials from NDRC, and experts in IT system design and
ETS framework design attended the meeting. In the meeting the team from Sino-Carbon and experts
in IT system design discussed the software developing plan. The focus of the discussion is on the
security issues of the software design of the national registry system.
Activity 2.2
Finish the software developing of the Registry System.
Activity 2.2.1 Finish the software developing of the national voluntary emission reduction
project registry system.
1. Tender Document
The documents for the tender procedure of the software development of the national registry system
have been completed. The tender document contains specific instructions on the requirements of the
business framework and the technical standards of the national registry system, including the
requirements on the security and performance of the system. Additionally the standards for assessing
the feasibility of the participants of the tender competition were also specifically determined in the
tender document.
2. Tender Procedure for Software Development
The tender procedure began in late November based on the tender document. Several software
developing companies expressed interest in participating in the tender competition. In the assessment
meeting of the render competition, three companies formally participated in the competition. After
standardized and legal assessment procedure, one company was chosen to perform the development of
the registry system.
3. Management of the Software Development
After the software development began, the team from SinoCarbon has started to manage the software
development process of the national registry system. Within two weeks, a development meeting
attended by the project manager of the software developing company, relevant developers and
representatives of the team from SinoCarbon will be held. In the meeting, the problems on technical
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issues and requirement issues that occur during the development process will be discussed and solved.
Additionally the team of SinoCarbon is also in charge of responding and solving such problems in real
time through e-mails and phone calls. To some crucial technical issues, representatives of the team
from SinoCarbon will participate in the development process in person. At the completion of one
regression stage of the software developing, the team from SinoCarbon will assess the result and
provide further modification requirements and recommendations to the software developing team.
Activity 2.2.2 Finish the software developing of the national ETS registry system.
According to the business framework design of the national registry system, the functionalities of the
national ETS registry system and the national voluntary emission reduction project registry system
should be contained in the national registry system. Therefore the project outcomes for this activity are
the same as the outcomes in Activity 2.2.1.
Activity 2.3
Test the Registry System Software base on function design, modify the function and improve
performance of the software.
Activity 2.3.1 Test and modify the software of national voluntary emission reduction project
registry system
Currently the team from SinoCarbon has begun the preparation for designing the test cases for the test
process of the national registry system.
Activity 2.3.2 Test and modify the software of the national ETS registry system
According to the business framework design of the national registry system, the functionalities of the
national ETS registry system and the national voluntary emission reduction project registry system
should be contained in the national registry system. Therefore the project outcomes for this activity are
the same as the outcomes in Activity 2.2.1.
Activity 2.4
According to the overall design, and considering the requirements of software running, propose
integrated construction plan for the whole system.
Activity 2.4.1 Draft the network construction plan
A design of hardware architecture has been presented by the team from SinoCarbon. The focus of the
proposed hardware design is on the security of the system. The design contains the hardware devices
that should be used by the system and the structure of the hardware system of the national registry
system. In addition the performance requirements of the hardware devices have also been presented in
the design of the hardware architecture.
The main considerations for designing the hardware architecture are the security requirements and the
performance requirements of the national registry system. In order for fulfilling the security
requirements of the national registry system, the network of the system is divided into several zones
with different security levels. Servers of each security level are deployed in the corresponding zone.
The access of each zone is protected by a series of network security devices. Additionally the
communication between two zones is also controlled by multiple security devices. In order to
determine the proper network security design, multiple designs were studied and compared. As a
result of balancing the cost and security level of the network, the types of the network security devices
that should be utilized by the network of the national registry system and the deployment
arrangements of the network were determined. By analyzing the performance requirements of the
national registry system, the performance requirements for the hardware of the servers were also
identified. Based on the performance requirements of the servers of the national registry system, the
models of each type of servers for the national registry system were determined. In consideration of
the performance requirements and the security requirements of the national registry system, the proper
types of storage devices including the storage devices for system backups are also presented in the
hardware architecture design.
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Activity 2.4.2 Draft the security construction plan.
The security construction plan has been included in the hardware architecture design and the software
architecture design of the national registry system.
Activity 2.4.3 Draft the data storage and backup plan
The data storage and backup plan has been included in the hardware architecture design of the national
registry system.
Activity 2.4.4 Organize relevant experts to review the whole system construction plan, and
adjust the plan according to reviewers' comment
1. Technical Workshop
A technical workshop attended by experts of hardware architecture design and development has been
held on 21th July. In the workshop, the design of the hardware architecture was thoroughly discussed.
2. Technical Issues to be solved
Several technical issues obtained by the discussion of the workshop listed below have been studied
and resolved.
The servers for the connections between the national registry system and the servers of trading
platforms should be deployed in a separate zone.
The strategy for scanning security holes should be refined.
Activity 2.5
Finish the whole registry system construction.
Activity 2.5.1 Finish the network construction
The document for the tender procedure of the hardware procurement has been prepared based on the
proposed hardware architecture of the national registry system. The document contains specific
requirements to the hardware for the national registry, such as servers, network and security devices,
middleware and database. Additionally the document also provides requirements on the services for
hardware installation and maintenance that should be provided by the procurement service provider.
The tender document has been released to public on 30th December 2013.
Activity 2.5.2 Finish the security system construction
The construction of the security system has been included in the network construction.
Activity 2.5.3 Finish the data storage and backup system construction
The construction of the data storage and backup system has been included in the network construction.
Output3：Capacity building
Activity 3.1
Draw up the instruction manual and guide for Chinese Voluntary Emission Reduction Trading
Register System.
Activity 3.1 has been completed except the sub-activities related to survey of the user manual of EU
registry (the user manual of EU Union Registry is still unachievable). The technical characteristics and
function of EU registry and other relevant registries have been surveyed and analysed. The user
manual and guide of relevant registries have been surveyed except the user manual of EU registry. The
user manual of Chinese Voluntary Emission Reduction Trading Registry and Carbon Emission
Trading Registry is close to be finished.
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Activity 3.2
Training the Relevant Staff of Chinese Voluntary Emission Reduction Trading Register System and
Carbon Emission Trading Register System, including Government Officers, System Users, Staff of
Exchanges, Participants of Emission Reduction Projects and Certification Institutions; Draw Up the
Teaching Materials for the Training.
Activity 3.2 includes three sub-activities, among which sub-activities 3.2.1 (Survey the training
requirement of the users and management staff for Chinese Voluntary Emission Reduction Trading
Register System and Carbon Emission Trading Register System training.) and 3.2.2 (Draw up the
teaching materials for the training of Chinese Voluntary Emission Reduction Trading Register System
according to the requirement of System users and the technical requirement of the System. ) have been
started since the second half of 2012 and are close to be finished and sub-activity 3.2.3(Training
government officers, system users, staff of exchanges, participants of emission reduction) is still in
progress.
A questionnaire survey has been carried out to collect the training requirement of the users and
management staff for Chinese Voluntary Emission Reduction Trading Registry and Carbon Emission
Trading Registry training.
The training materials for Chinese Voluntary Emission Reduction Trading Registry and Carbon
Emission Trading Registry training according to the requirement of the system users and technical
requirement of the system have been developed.
Activity 3.3
Summarize the Training Results and Improve the Chinese Voluntary Emission Reduction Trading
Register System and Carbon Emission Trading Register System come from Relevant Institutions.
Two sub-activities 3.3.1(Summarize and analyze the problems and suggestions which occurred during
the System training.) and 3.3.2 (Improvement suggestions for Chinese Voluntary Emission Reduction
Trading Register System and Carbon Emission Trading Register System.) are still in progress
Innovation in 2013
In 2013, the project created a very innovative model for knowledge sharing and application by
matching the knowledge according to different scales at sub-national, national and regional level with
comprehensive perspectives from both public and private sector. This innovation is even more
important for the work in 2014 when the technical stage is completed and testing/business model
feasibility will be the key focus.
More innovation will be needed for how public and private sector interact for ETS development for
the project in 2014 and how to draw lessons and good practices from Norway and other developed
country as well as EU for ETS development in China.
4. Project Management and Oversight
Implementation status
Progress to date has been satisfactory during the reporting period and the main targets of technical
development stage have been achieved. As the main focus will include more institutional building and
business model development testing in 2014, communication will need to be further enhanced to better
share the good and practical experience in Norway and EU in order to enhance ETS development in
China. The quality of project management structure for implementation is good. All project activities
have been largely delivered on time.
Monitoring and Evaluation
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The monitoring and evaluation management during the reporting period is adequate. Several rounds of
meeting among NDRC, UNDP, and the Embassy were held and one assembly working level meeting
with all key partners involved was held on regular basis.
Midterm evaluation is completed with very positive conclusion of the project results achieved. The
conclusions are as followed:

The Projects are proceeding at a satisfactory rate but with some uncertainty on the desired
outcomes and the extent of work required to deliver a functional and robust ETS system;

The ETS Project has made satisfactory progress in building a strong foundation for a
national ETS registry system. Moreover, the Project has taken pragmatic approaches that
include the consolidation of the voluntary and national ETS systems in the country into
one ETS system. An issue for consideration by the Project Managers, however, is the
necessity of having a specific targeted final outcome of the activities that would include
the intended state of the ETS system to be handed over to NDRC when all Project
expenditures are exhausted;

The benefits of NEA participation on these Projects are significant including their inputs
and validation of NDRC’s approach to the design of enterprise-GHG guidelines, GHG
inventories and ETS designs and operations.
Human Resource Management
Human resources were effectively managed and adequate to support progress.
Risk management
No significant risk was identified during the reporting period.
The main risk will be the uncertainty of when the policy to endorse ETS development in China will be
launched which may need more flexible technical upgrade. To manage the risk, the project needs to
balance between building technical/institutional capacity and flexibility for new technology upgrade.
Project will also strengthen the requests for the relevant procurements.
Communication and advocacy
Working seminars were held periodically to discuss the project progress. Communication among the
Chinese project partners of this project (Tsinghua University, NCSC and Sino Carbon), NEA, PMO,
UNDP, the Embassy is further strengthened through midterm evaluation.
The next step work will be more focus on the business model, practical solutions and institutional
/individual capacity building for ETS development, more close and intensive communication will be
needed for better project implementation.
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5. Financial Management
The ETS project is being delivered according to the planned budget with details as follows (amounts
are all in US$):
Source of Fund
Expenditure Vs.
Approved project
budget by source of
funding
UNDP
Government
Cost Sharing
Third Party
Cost-sharing
Other (please
specify)
Total
Funds
Received
2013
Budget
2013
Expenditure
2013
-
-
-
1,308,448.50
1,768,895
1,475,237.77
1,308,448.50
1,768,895
1,475,237.77
Table 1: Expenditure Vs. Approved project budget by source of funding
Table 2: 2013 Financial Report
It should be noted that 2 payments have been made by the Embassy during the year 2013 and the
second payment was provided to cover the full project cost for newly proposed activities.
The delivery rate is 83.4% against the planned budget as of December 31, 2013. The financial report
includes the expenditures (NDRC and NEA) throughout the year of 2013. Part of the reason for
increasing delivery is due to the overcharge of UNDP GMS cost in 2013, which will be recalculated
by the end of the project.
USD3,887,430.47 (NOK23,175,762.00) were received in project account and USD1,625,208.87 spent
until December 31, 2012. Therefore, USD2,262,221.60 will be carried over to 2013.
USD1,308,448.50 (NOK7,807,890.00) was received in 2013 and USD1,475,237.77 spent until Dec 31,
2013. Therefore, USD2,095,432.03 will be the total budget for 2014 for ETS project.
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Nevertheless, it shows clearly that NEA’s involvement is more limited than what was originally
planned. Future possibilities to strengthen NEAs role in the project implementation could include 1)
more participation in relevant workshops or smaller groups discussions with Chinese counterparts; 2)
facilitating more international consultants from NEA to take part in the technical meetings/tel/video
conference with national consultants to ensure NEA’s more contribution/input to the project; 3)
besides the Norwegian experience, NEA’s experts can also share European and other countries’ smart
solutions.
6. Management recommendations
The following are recommendations from the mid-term evaluation and it should be further discussed
and implemented based upon the agreement of Norway Embassy, NEA, NDRC and UNDP.
Recommendation 1: Consider addressing the lack of specific desired outcomes and outputs of
the ETS Project in the 2014 Work Plan. While the Evaluators understand that this may have been
intentional, the use of SMART indicators to describe the desired outcomes (or objectives) and
outputs of the ETS Project will provide a clearer picture of the expected results of the Project at
its conclusion. More importantly, it can improve the ability for project managers to monitor their
effectiveness in utilizing remaining resources for the remaining period of the Project. If there is a
realization that targets or outcomes cannot be achieved during the course of the Project, project
managers can reset these targets and outcomes through adaptive management and implementing
changes to attain new targets and outcomes:

The work plan can improve its definition on the duration and extent of the ETS registry
testing phase that would include debugging software errors, introducing new
functionalities, and changing software versions. The benefit to having a “measure” of the
work remaining in the ETS system is to provide a target for project managers to manage
remaining resources (e.g. how many times the system will be debugged or how many
functionalities would be introduced). The lack of such measures may lead to difficulties
in optimizing the use of remaining resources to needed actions to achieve targets, and in
measuring the effectiveness of Norwegian technical assistance in subsequent project
evaluations;

Similar to providing measures of the ETS registry testing phase, the work plan can
improve its definition of work required to strengthen ETS registry operational issues.
This should include various approaches for dealing with fraud detection and prevention,
stress testing for transaction volume spikes, and a control plan to maintain system
integrity. Examples of measures for improving the operational aspects of the ETS may
include:
 a quantity of fraud detection measures made during the remaining period of
time; or
 a definition of stress tests on the ETS system that may include a certain
volume of transactions over a one-day period (which has the potential to
occur according to EU experience where enterprises could delay acting on
trades until a deadline day for compliance such as April 30, a target date of
EU compliance to ETS permits for a year);
Setting of targets needs to be discussed and set with the relevant experts to ensure that the
targets can be attained within the remaining budget and an appropriate time period. With
the current terminal date of both GHG and ETS Projects being June 30, 2014, there will
be new activities planned to meet new targets for the ETS Project that will provide
justification for an extension of the terminal date beyond June 30, 2014;
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
The work plans should make provisions for the ETS Project to target specialized
assistance in the area of fraud prevention and system security. While there is good
experience within China of such protection within the financial sector and government
websites, the benefits of sourcing the best global expertise in this area are significant,
especially in consideration of the potential value of a Chinese carbon market and the fiscal
consequences of fraudulent transactions or security breaches into the system. Analogous
to constant efforts in eradicating malaria, a solution to prevent all fraud and security
breaches against an ETS is also a long-term effort as past human behaviour indicates that
there will always be an evolution of new ideas and approaches for breaching the system1;

Sufficient resources should be availed for NEA assistance to prepare an ETS user manual
based on NEA experience in managing ETS systems in Norway and the EU. The
provision of this assistance is significant with the understanding that there will not be any
access to existing user manuals from other ETSs;

The ETS work plan should acknowledge the uncertainty of when the State Council will
authorize operationalization of the ETS system, and adjust their expectations of capacity
building activities that would secure “corporate memory” of the ETS knowledge provided
from these activities. Two actions are proposed:
 Formation of an “ETS Management Cell” housing all personnel with ETS
operational knowledge. In comparison with other countries, the risk of
loosing Chinese Government personnel in specific positions is lower; hence,
provisions could be made to retain and secure personnel with ETS corporate
memory until 2016 or later when the ETS is operational;
 Proceed with the current procurement process for ETS hardware as efficiently
as possible considering the need of testing with a real system but with a
provision that the system can be upgraded at a later date (this is related to
Recommendation 3). This will allow future ETS operations personnel to be
trained in 2014. A postponement of the procurement process of the ETS
system will cause substantial delays to the ETS operation start-up date,
increase the time delay between capacity building activities, and reduce the
effectiveness of capacity building activities;
While the experience of the Evaluators is not sufficient to provide specific
recommendations on the allocation of remaining resources to the GHG and ETS Projects,
they do recommend serious consideration for the extension of the GHG and ETS Projects
from the end of June 2014 to the end of December 2014 or later. As such, a 2014 work
plan with specific targets for the ETS testing phase and the strengthening of the ETS
operational issues can provide the basis for an extension of the ETS project to the end of
December 2014 or later. The additional time for an extension can be justified on the
amount of time, effort and fiscal resources required to achieve newly defined outcomes,
notably on security issues with the ETS Project, which could only be resolved once the
testing phase is completed in April 2014 (or later if deemed appropriate);

Recommendation 2: Other complementary ETS assistance to NDRC including the “Partnership
for Market Readiness” Project of the World Bank should be documented in NEA progress reports.
This will provide confidence to MFA and external reviewers of a minimization of overlap
1
Examples of ETS system security issues includes preferred persons with access to ETS transaction
folders, filtering of certain e-mail addresses, double or triple approval of documents, and criminal checks
of trading participants.
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between NEA technical assistance and ETS development with other donors 2 , and that the
effectiveness of MFA resources is being maximized;
Recommendation 3: If possible and for reasons of cost-effectiveness, NDRC should consider
flexibility clauses in their current procurement process for ETS hardware to ensure that the best
possible equipment is available when the State approves operationalization of the ETS system.
The Evaluation team was informed that NDRC procurement of the ETS hardware is underway,
and that any recommendation of delaying or halting of the process is not feasible. With an
expected delay in ETS operationalization until 2016 or later pending State Council approval,
there is a risk that the 2014 technology may be superseded by 2016 hardware improvements. By
introducing flexibility in the procurement process of ETS hardware, NDRC can implement one of
the following actions:
a) proceed with procurement as currently scheduled considering the need of testing with
a real system with the provision that the system can be suitably upgraded when the
system is operational and at a reasonable cost; or
b) proceed with procurement with a delayed delivery date to enable procurement of
“next-generation” hardware in 2015 or later.
The advantage of a system that can be upgraded is that the hardware can be setup at an early date
allowing the training of operations personnel for the ETS system to commence at an earlier date.
Regardless, the impact of implementing one of these actions will allow NDRC to maintain the
desired momentum in its current procurement process (which may take until late 2014 or later to
complete) and to procure the best hardware technologies available on the market;
6.1 Regular communication among the project partners is needed for effective implementation
of the project.
Communication is crucial to effective implementation of the projects. Communication should be
increased and set for on a regular basis among all the partners while UNDP will take a lead in this.
On the f project working meetings among the parties in November, a better system for communication
between project management for information sharing, particularly on project progress, and possible
delays, was put on the agenda.
6.2 Consider involving NEA beyond the planned activities.
“Given the extensive experience and expertise in designing and implementing ETS in Norway,
additional value of involving NEA (Norwegian) experts in the process of implementing the ETS
project should be explored.
Future possibilities for NEA to be more active in project implementation could include 1) more
participation in relevant workshops or smaller groups discussions with Chinese counterparts; 2)
facilitating more international consultants from NEA to take part in the technical meetings/tel/video
conference with national consultants to ensure NEA’s more contribution/input to the project; 3)
besides the Norwegian experience, NEA’s experts can also share European and other countries’ smart
solutions.
6.3 Advanced notice is needed for involving NEA experts.
2
The Evaluation team is aware from NDRC of possible future contributions from GIZ and the EU for
capacity building in the area of GHG and ETS development.
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Given NEA’s inputs are needed for jointly conducting training workshops and other activities, notices
have to made to NEA earlier enough for them to set their schedules and apply for their visas, rather
than giving only a 3-week leeway. Main activities, which need to involve NEA, will be discussed at
the beginning of the year during the work plan preparation stage. During the implementation stage, if
adjustment is needed NEA will be informed with sufficient time for the corresponding change needed.
7. Gender
The ETS project is not meant to be a gender oriented project, however, women do take a considerable
percentage among the 3 Chinese and NEA experts and the participants of the project-organized
workshops, along the fact that the senior management and the PMO staff are all women on the
Chinese side.
8. Anti-Corruption
The anti-corruption measures have been put in place with annual auditing conducted on both the
Chinese and NEA sides respectively.
9. Conclusion
The general progress of ETS project has had a positive development during the report period and
achieved satisfying progress. It is very encouraging to note that the two projects are in line with and
useful to China’s priorities in climate change and emission reduction, which also fall into the
Norwegian key priority area for bilateral cooperation with China.
NDRC is confident about the cooperation in the future and impactful outputs are expected from the
projects. For improved communication among the project management units, the domestic and
international project partners, and the donor, a regular teleconference via phone/Skype plus emails, or
workshops has been put in place and has been proven effective.
In 2013, the project created a very innovative model for knowledge sharing and application by
matching the knowledge according to different scales at sub-national, national and regional level with
comprehensive perspectives from both public and private sector. This innovation is even more
important for the work in 2014 when the technical stage is completed and testing/business model
feasibility will be the key focus.
More innovation will be needed for how public and private sector interact for ETS development for
the project in 2014 and how to draw lessons and good practices from Norway and other developed
country as well as EU for ETS development in China.
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